Analysis: same serious problems, new leader: can Argentina solve the riddle of the economy?

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BUENOS AIRES, July 29 (Reuters) – Argentina’s incoming economy chief, the third crisis-ridden country in less than a month, could be his last best chance to right a sinking ship, or at least to avoid further deterioration before a peak stake election next year.

A cabinet reshuffle on Thursday hosted by President Alberto Fernandez followed days of frenzied rumors over whether Silvina Batakis, appointed minister just a month ago after the shock resignation of longtime economy delegate Martin Guzman , could survive.

The task of tackling growing unrest in South America’s second-largest economy after Brazil now falls to Sergio Massa, a congressional leader from the ruling Peronist coalition, who will oversee economic policy, as well as industrial policy and agriculture from next week. Read more

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“This seems to be their last chance,” said political analyst Andres Malamud, referring to government officials’ so far unsuccessful efforts to rein in sky-high inflation, overspending and a falling peso.

Malamud described recruiting Massa for the expanded role as “more of a desperate gamble than a reasoned gamble”, adding that reducing a growing budget deficit and restoring confidence must be top priorities.

Massa told reporters on Friday that he would announce further measures next week, although it is unclear what they will be.

Fernandez’s bitterly divided center-left coalition hopes Massa’s arrival will calm financial markets. The initial response was positive on Friday, with the stock market recouping some losses.

The government – and some observers – also hope it can help calm growing social unrest.

“It seems to me that Massa and his skills can contain street protests a little better,” said political analyst Jorge Giaccobe.

The country, particularly the capital Buenos Aires, has seen near-constant protest marches calling for measures such as a universal basic income or simply more aggressive action to contain soaring consumer prices.

Giaccobe thinks lower expectations should guide Massa.

“It’s one thing to fix a problem, but it’s another thing not to make it worse,” he said, as the government faces an uphill battle for re-election in 2023.

Batakis traveled to Washington last week to assure jittery finance officials, including heads of the International Monetary Fund (IMF), that the government remains committed to its $44 billion debt deal with the lender.

The president on Friday sought to bolster his new “superminister” in social media posts, touting Massa’s “vision, ability and experience”.

But political needs may ultimately complicate Massa’s ability to strike the right balance, as any spending cuts or other potentially painful fiscal medicine could further damage a government that already finds itself cornered.

“In Argentina, there are two types of balance: political and economic, which suits the ruling class versus economic logic,” said economist Natalia Motyl.

“It all depends on which side wins.”

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Reporting by Lucila Sigal; Additional reporting by Walter Bianchi and Hernan Nessi; Written by Carolina Pulice; Editing by David Alire Garcia and Daniel Wallis

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